Fed chief stands firm on rate rise pre­dic­tions


Fed­eral Re­serve Bank of New York pres­i­dent William Dud­ley said on Thurs­day the case for rate rises this year re­mained ro­bust amid risks the econ­omy could over­heat, and warned that the new tax law could boost the US deficit over time.

If the econ­omy con­tin­ues to make progress on achiev­ing the Fed’s job and in­fla­tion goals, “I will con­tinue to ad­vo­cate for grad­u­ally re­mov­ing mon­e­tary pol­icy ac­com­mo­da­tion”, Mr Dud­ley said in a speech given to a gath­er­ing of the Se­cu­ri­ties In­dus­try and Fi­nan­cial Mar­kets As­so­ci­a­tion in New York.

The ar­gu­ment in favour of rate rises “re­mains strong,” he said. In­fla­tion that is short of the Fed’s 2 per cent tar­get “ar­gues for pa­tience,” he said, adding “I think that is more than offset by an out­look of above-trend growth, driven by ac­com­moda­tive mon­e­tary pol­icy and fi­nan­cial con­di­tions, as well as an in­creas­ingly ex­pan­sion­ary fis­cal pol­icy.”

The cen­tral banker, who is set to re­tire in a few months, also serves as vice-chair­man of the Fed’s in­ter­est-rate-set­ting Fed­eral Open Mar­ket Com­mit­tee. Mr Dud­ley was a con­sis­tent sup­porter of in­creas­ing short-term in­ter­est rates last year.

The Fed de­liv­ered three in­creases in 2017, tak­ing its overnight tar­get rate range to be­tween 1.25 per cent and 1.5 per cent, and it pen­cilled in about three more in­creases for this year.

Mr Dud­ley said the Fed’s col­lec­tive ex­pec­ta­tion for three rate rises in 2018 “doesn’t seem to be an un­rea­son­able sort of start­ing point” for think­ing about mon­e­tary pol­icy, but what hap­pens “de­pends on how the out­look evolves”. “Fi­nan­cial con­di­tions to­day are eas­ier than when we started to re­move mon­e­tary pol­icy ac­com­mo­da­tion,” Mr Dud­ley said.

William Dud­ley

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